For a conservative approach, wait for shares to drop two days in a row and buy near the open of the third day. Another approach that I favor is to sell cash-secured put options. Selling put options will lower your overall risk and can place the odds in your favor.

Right now, I like the August $65 strike price puts as an option short candidate. I want to receive at least $1.98 for premium. That's above the current amount, but the market rarely rewards rushing into a position instead of waiting for an optimal entry.

The advantage of selling an August $65 put is that your overall risk is reduced to about $63.02 and below normal retracement swings. The timing is advantageous also. The next earnings report is a month away, allowing about half the time until expiration to decay. If Starbucks fails to continue higher and trades in a range near the current price, you still profit.

That's why I like selling put options instead of buying stock. You gain if shares move in your direction -- and if they just sit there. If the shares fall, you lose less than if you bought a comparable number of shares outright.

I expect Starbucks to continue delivering profits one cup at a time.

At the time of publication, Weinstein held no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Robert Weinstein currently blogs, mentors traders, and writes several weekly columns in Rocco Pendola's Option Investing newsletter from his home in northern Wisconsin. Robert tends to focus on the psychological importance of goals, risk mitigation, emotion, and relatively short term market exposure. With nearly 30 years of studying and investing experience, Robert has experienced the many ups and downs in the financial markets and uses the knowledge gained to maintain balance. Robert believes the best way to make money investing is to avoid losing it. The best way to avoid losing is to know what emotional traps lay in the path of investors and learning how to avoid them. Robert is a voracious reader of financial related books often completing more than one book a week while not trading or writing. Robert contributes to his blog at paid2trade.com on a regular basis with an emphasis on studying behavior finance.


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